Trump vs. North Korea; Trump Celebrates New Year With Convicted Felon; Americans in South Korea Prepare For Worst-Case Scenario; New York Governor Proposes Free Tuition At State Colleges. Aired 4:30-5p ET

Aired January 3, 2017 - 16:30 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[16:30:03]

DAVID DRUCKER, "THE WASHINGTON EXAMINER": It's more cost-effective to manufacture there and import back. It's because, in America, we want the best price and the best quality together.

And if we don't get it we go to the competitor and the other guy goes out of business. And so you can't blame these companies for making a dollars-and-cents decision. That's the way this works.

JIM SCIUTTO, CNN ANCHOR: Absolutely.

Anne Gearan, talking about Russia hacking, so, we have learned the classified review into the hacking that the president ordered could be done as soon as this week. But I want to play some sound that one of Trump's national security advisers said to us on this broadcast yesterday about how Donald Trump is playing the hacking game. It's James Woolsey here.

(BEGIN VIDEO CLIP)

JAMES WOOLSEY, FORMER CIA DIRECTOR: Hacking leaves a lot of room for weaving around like this. And Donald Trump is an expert at this kind of weaving around and attracting everybody's attention.

It's exactly what he did during the campaign.

SCIUTTO: You are saying he is playing us, in effect?

WOOLSEY: There is a possibility that he is a little bit, yes.

SCIUTTO: Is that something a president-elect should be doing on a serious issue of national security?

WOOLSEY: Why not? He is not interfering with anything. He's not talking about anything classified.

(END VIDEO CLIP)

SCIUTTO: Pretty remarkable admission, is it not?

ANNE GEARAN, "THE WASHINGTON POST": It is indeed. And, I mean, I don't even know where to go with that, right? He's

essentially saying, yes, you know, he's just trying to jack around a little bit. It's kind of fun, right? It's sort of interesting. And, I mean, the Russians have got to be thinking, well, we thought that was sort of what was happening, but what do they do with it? It's a little bit of a head game he's doing ahead of the inauguration.

SCIUTTO: Just this week, over the weekend, there was this secret information only he knows that's going to be released. His advisers were already walking that back. We're not hearing that anymore.

Now what they're saying, the talking point is, let's wait for the final report, this review. But this review has been ordered by the president, President Obama. If the president-elect didn't accept the intelligence community's assessment, why will he accept one by the outgoing Democratic president?

MOLLIE HEMINGWAY, "THE FEDERALIST": Well, I think also, though, we haven't gotten good information yet. If you look at the report that came out last week that was supposed to settle the issue how much Russia was involved in meddling, it was very vague, it was very nonspecific. It was just using information that was already available like about how different commercial programs had identified threats that they thought were Russian-affiliated.

And this report just lumped them all and just said that they were all Russian intelligence services without actually providing the substantiation they were in fact Russian intelligence agencies. If you're going to make a big production about Russia's meddling and if you're going to have half of Democratic voters believing that Russia hacked the vote totals, which is completely not true, I think that, yes, we should be patient.

We should wait and see some good information. Otherwise, it just looks like this is a lot of political game playing.

SCIUTTO: Just to be clear, what has not been in question is who did the hacking. It is Russia. Right? The question has been, what was the intention, did it influence the election, et cetera?

But from the campaign, you're getting a lot of muddying of the waters about who was behind it.

DRUCKER: So, if you talk to Republicans on the Hill that are steeped in this, they will tell you that Russia is a bad actor that is constantly trying to penetrate U.S. political parties and government agencies, including intelligence agencies and members of Congress.

They know that Russia is doing this all the time. They also will tell you that Russia is uniquely capable of the kind of sophisticated hacking that is required to penetrate government agencies and political parties. So, the issue is, then, well, did Putin do this for Trump?

And that's where they're hanging their hat on this idea that we don't know for sure. There is no evidence that Putin specifically did this to help elect Donald Trump.

SCIUTTO: But that doesn't -- the thing is you will hear from Republicans, it's not me saying it, it's the McCains and the Grahams of the world, and even the House speaker, Republican, and the House majority and Senate majority leader, Republican, who say that regardless what the intention was, it's a serious fact that Russia infiltrated these systems and attempted to influence.

GEARAN: And did something different here than we have seen in previous elections. I mean, foreign meddling in U.S. elections is not new, nor is U.S. meddling in other countries' elections.

What's new is the fact that information picked up as part of that meddling was released in what appears to be a partisan-directed way. And that is the thing that the Democrat are most focused on. It's also a thing that McCain and Graham and their kind of coterie among congressional Republicans are fixated on as well.

They are assuming it was Russia behind it, and they are assuming that Russia was doing that for a purpose. That's a problem for them.

SCIUTTO: The assessment has been with confidence that Russia was behind it. The question is what their intentions are.

Looking ahead to the inauguration, you now have this remarkable moment being set up with Bill and Hillary Clinton now accepting the invitation to come to Trump's inauguration, which, to be clear, is fitting with tradition. It's not unusual. How is that going to look, Mollie?

How is that moment going to be, Hillary Clinton there close to Donald Trump? There's not a lot of love lost in that relationship.

HEMINGWAY: You keep thinking of how Hillary Clinton, one of her big pitches she was making about why she should be elected was she was just imagine Donald Trump up there at that moment, how horrible that would be.

[16:35:00]

And so this was a refutation of that idea. But this is also just a great reminder of what makes this country great. We have a peaceful transfer of power every four to eight years. It takes a lot of good will and good work on all sides to make sure that happens. So, it's great to see people who really have no love for Donald Trump coming forward and helping accomplish that.

SCIUTTO: And the Bushes there, too, David Drucker, as well.

DRUCKER: They are. That really shows you that I guess everybody can put politics aside at least for a few minutes, because Trump was unsparingly brutal on the Bushes and the Bush agenda, just as he was of Hillary Clinton in the general election.

A big name in hotels and a convicted felon named Joey No Socks, that's right after this.

(COMMERCIAL BREAK)

SCIUTTO: Welcome back, and more in our politics lead now.

It is certainly going to attract attention, deserves attention, when a U.S. president-elect is associating with someone who has the nickname Joey No Socks.

New video show Donald Trump ringing in the new year on stage with Joseph Cinque, a big name in hotels, and we should mention as well a convicted felon.

CNN's Miguel Marquez is looking into this for us.

Miguel, this has been a long association both with Trump and the Trump Organization.

MIGUEL MARQUEZ, CNN CORRESPONDENT: Indeed, he does, Jim.

Trump and Joey No Socks Cinque have known each other for many years. The big question though now is how is it that the U.S. Secret Service and Trump's own people are allowing a convicted felon such close access to the president-elect?

(BEGIN VIDEOTAPE)

MARQUEZ (voice-over): That's Joseph Cinque, AKA Joey No Socks, convicted of a felony in 1989 for art theft, celebrating next to the president-elect on New Year's Eve.

DONALD TRUMP (R), PRESIDENT-ELECT: Well, thank you very much. It's a great honor.

MARQUEZ: Cinque's current lawyer insists the art was legally owned by Cinque, but the New York Supreme Court says Joey No Socks Cinque pled guilty and His conviction still stands. He was given a conditional discharge and served no jail time.

[16:40:00]

Trump and Cinque go way back, with Cinque helming the American Academy of Hospitality Sciences, an organization that over the years Trump has been listed as ambassador extraordinaire. His children served as honorary trustees on the board and the current board is made up of several Trump friends and business associates.

In 2009, Trump was given an award by Cinque, one of many hotel awards his organization has bestowed on Trump's properties over the years.

DAVID CAY JOHNSTON, AUTHOR, "THE FINE PRINT": It has no meaning whatsoever. But Donald Trump proudly hangs at least 19 awards in his golf courses. You will notice they're signed not just by Joey No Socks. They're also signed by Donald J. Trump as chairman of the board.

MARQUEZ: Yes, Trump's signature is on some of the awards. It's like Trump giving himself an award.

TRUMP: I would especially like to congratulate and thank Joe Cinque, the head of the academy, for the unbelievable job that he does. There is nobody like him. He's a special guy. There is just nobody close.

MARQUEZ: And at last year's Mar-a-Lago New Year's Eve celebration.

TRUMP: So highly respected within the hospitality industry.

MARQUEZ: Again, the president-elect front and center with Joey No Socks Cinque.

Last May, Trump told the Associated Press he didn't know Cinque well and wasn't aware of his conviction.

JOHNSTON: Let's assume Donald Trump doesn't know who this guy is. Wow. Donald Trump is so unaware and doesn't have people around him to warn him that you are standing next to a convicted felon who credibly claimed to have a relationship with John Gotti? That's astonishing.

(END VIDEOTAPE)

MARQUEZ: Now, the U.S. Secret Service declined to comment on how it is that a convicted felon ended up so close to Donald Trump at this year's New Year's Eve celebration.

They referred us over to Donald Trump's transition folks, who had no comment. We also reached out to Joey No Socks Cinque himself and we have not heard back from him -- Jim.

SCIUTTO: Miguel Marquez, thanks very much.

It won't happen again, that's what Donald Trump is tweeting about North Korea's plans that could develop nukes to reach the U.S. But his next tweet could limit his options on how to prevent it.

Then, it would be the first program of its kind in the country, free college tuition for any students at in-state universities as long as their parents meet one requirement. That's ahead.

(COMMERCIAL BREAK)

[16:45:00] SCIUTTO: We're back now with our "WORLD LEAD". President- elect Donald Trump trying to shut down the North Korean threat with, yes, a tweet. Trump vowed to prevent Kim Jong-un from fulfilling his New Year's pledge to test launch a long-range missile that theoretically could reach here in the U.S. Then, the incoming U.S. president went one step further lashing out against China suggesting that it is not doing enough to denuclearize North Korea. Let me bring in CNN Pentagon Correspondent, Barbara Starr. Barbara, Trump's response to Kim Jong-un, I mean, certainly getting into pretty dangerous territory there. Speaking to defense officials, is this considered a dangerous tweet from the incoming U.S. president? BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, perhaps Jim, eyebrow-raising to say the least. Now, even today, the White House Press Secretary Josh Earnest suggested that President Obama still has doubts about Donald Trump's ability to protect the U.S. from North Korea.

(BEGIN VIDEOTAPE)

STARR: Nobody knows if North Korea's Kim Jong-un has seen Donald Trump's latest tweet. "North Korea just stated that it is in the final stages of developing a nuclear weapon capable of reaching parts of the U.S. It won't happen." And nobody knows how North Korea's erratic leader will now react.

CEDRIC LEIGHTON, CNN MILITARY ANALYST: This particular tweet is in essence telling the North Koreans, putting them on notice that they are going to be watched very carefully by the incoming administration and that they don't have carte blanche to go ahead and develop an intercontinental ballistic missile.

STARR: It's not clear how soon Kim can be ready to launch him this whole big that could reach the U.S. But the prospect raises alarm. If a nuclear weapon exploded over a west coast population center, like Los Angeles or San Francisco, tens of thousands could be killed. Even a non-nuclear North Korean attack into South Korea could also kill tens of thousands, including 30,000 U.S. troops based there. Trump on the campaign trail was open to talking to Kim.

DONALD TRUMP, PRESIDENT-ELECT OF THE UNITED STATES: I wouldn't go there, that I can tell you. If he came here, I'd accept him, but I wouldn't give him a state dinner.

STARR: Now, Trump wants to pressure China to get Kim to roll back his nuclear program. "China has been taking out massive amounts of money and wealth from the U.S. in totally one-sided trade but it won't help with North Korea. Nice." But that message already largely brushed aside by Beijing.

GENG SHUANG, FOREIGN MINISTRY SPOKESPERSON (through translator): We hope to see all sides, avoid remarks and actions that would escalate tensions.

STARR: The Obama administration doesn't think North Korea can threaten the U.S. with a nuclear missile yet.

JOHN KIRBY, STATE DEPARTMENT SPOKESPERSON: We do not believe that he, at this point in time, has the capability to tip one of these with a nuclear warhead. That's as far as I'm going to go in terms of assessing. STARR: The current U.S. military response focuses on defending against an attack with interceptors in Alaska and California, and ships in the western pacific. But in the face of a sudden imminent threat, U.S. officials tell CNN, President Trump could activate existing plans for preemptive attacks, so-called "no mercy strikes" to destroy the regime and its weapons. A former Defense Secretary who called for a pre-emptive strike in 2006 now says it must not happen.

WILLIAM PERRY, FORMER DEFENSE SECRETART: A pre-emptive strike could bring about complete and total catastrophe to South Korea and to Japan. So, that is not an option.

(END VIDEOTAPE)

STARR: Now, the man who stood with Bill Perry, that Defense Secretary back in 2006, calling for a pre-emptive strike, the current Defense Secretary in the Obama Administration, Secretary Ash Carter. Jim?

SCIUTTO: And the North Koreans have made a lot of progress since then. Barbara Starr, thanks very much. If escalating tensions lead to war, how would American soldiers and their families in South Korea protect themselves? CNN's Alexandra Field has an exclusive look at how U.S. citizens there are now preparing for the worst.

ALEXANDRA FIELD, CNN US/INTERNTIONAL CORRESPONDENT: Jim, U.S. military personnel around the world are prepared for the possibility of confronting danger. But it's a much more unique situation that their families would also have to prepare. But that's the reality in South Korea. It's a possibility that the U.S. military takes so seriously that they actually require these families to maintain a certain level of readiness to evacuate. And in this case, we are able to ride along as they practiced taking some of these families, off the peninsula.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: All right. Just from the back.

UNIDENTIFIED MALE: You're like a fish in a fish tank, Brianna

FIELD: For Brianna Martinez, a home is a place that's still technically at war.

UNIDENTIFIED MALE: Again, this will protect your child from chemical and biological agent for up to 12 hours --

FIELD: The Martinez's are an American military family currently based in South Korea where U.S. forces could one day be called to respond to threats from North Korea, a looming possibility that could leave American civilians on the peninsula looking for safety. Do the girls understand what kind of emergency they're practicing for?

UNIDENTIFIED FEMALE: We told the girls that Korea was at war at one point. So, we come over here to defend what we fought for.

UNIDENTIFIED MALE: (INAUDIBLE) just set let me know. FIELD: The South Korean and the U.S. military regularly run joint drills to maintain their readiness, but this drill is for American military families.

It shows them how their soldiers could help them evacuate if tensions between the north and the south turned to conflict. Nicole Martinez and her family volunteered for the practice run that also helps the army prepare.

Families learn where to assemble in case of an emergency, manmade or otherwise. They're shown what will be allowed to pack and how the military will keep track of them.

The drill sends them south. They spend two days hop scotching by bus and by helicopter between U.S. installations, before reaching a South Korean air field and flying out.

In the event of a real threat, the U.S. state department would decide how many Americans and their families would need to evacuate. In order to get people off the peninsula quickly, the army says they would likely send families to safe havens right here in the region, places like Okinawa, Japan. This is somewhere that families could take shelter before planning that much longer trip back to the states.

Real world lessons for American children seen at different part of the world.

Do your kids know the name Kim Jong-un?

UNIDENTIFIED FEMALE: They don't. We've haven't touched on that, but our military kids are. This is what they learn in school. They know what's going on. They know that they have to keep up with current events that are going on around the world.

FIELD: Raising a family in South Korea, Martinez who was a veteran says she feels safe. She doesn't worry about a threat. She knows it's possible. She wants her children to learn how to prepare.

(END VIDEOTAPE)

FIELD: While these drills are about familiarizing families with the evacuation procedures, they're also about testing the military's readiness to evacuate Americans from the Korean peninsula. Unless they know what exactly the threat is, they don't know how many Americans they could potentially be ordered to move or how quickly they would have to do it. They tell us they prepare by practicing different routes and by using a number of different methods of evacuating people, everything from helicopters, planes, buses, even dedicated train routes. Jim?

SCIUTTO: Alexandra Field, thanks very much. One state now wants to offer free tuition for students at all public universities. But there is a catch. That's next.

(COMMERCIAL BREAK) SCIUTTO: Welcome back to the lead, our "MONEY LEAD" now. Free college tuition that is the promise put forth today by New York Governor Andrew Cuomo and Vermont Senator Bernie Sanders. The beneficiaries -- middle and low-income students at any of the Empire State's public universities. CNN'S National Correspondent, Deborah Feyerick, joins me now live. So Deb, how exactly would families make this work?

DEBORAH FEYERICK, CNN NATIONAL CORRESPONDENT: Well, here's how it goes. The governor and senator, proposing free tuition, fighting a student's average college debt of $30,000 for basic education. It's designed for middle class and lower income families who earn $125,000 and under. And here's how it works. First, students have to be accepted into either two or four-year public program. They then apply for existing state and federal financial aid. The governor's new Excelsior Scholarship then covers what's left over, essentially closing the tuition gap and making tuition free. Now, this could impact 80 percent or 940,000 eligible New York households with college age children. It is only for public universities and it's expected to cost about $163 million a year. It does not cover undocumented students nor does it cover any costs outside of tuition, for example, books or room and board.

SCIUTTO: Still, I imagine a big deal for a lot of middle and lower income families. So, how would New York State pay for this?

FEYERICK: Well, most likely, taxpayer dollars. The governor is going to have to get approval from the legislature. New York assembly's leading republican Brian Cull has criticized the cost of the $163 million a year plan, saying that it's unfair to tax payers because the governor is telling New Yorkers essentially to write a bigger check. But if approved, the Excelsior Scholarship would begin this year in 2017, helping families making $100,000 or less. It increases gradually as you see there, and would by 2019 cover those making $125,000 or less. And one important aspect to this plan, Jim, is that full-time enrollment is mandatory. And the reason for that is they want to accelerate education and boost on-time graduation rates in New York State which for a four-year public college are just 39 percent. It drops off even more for a two-year public college to 8.5 percent. So, they want to get them in, they want to get them through the four- year or two years and then get them into the work force. Jim?

SCIUTTO: Deb Feyerick, thanks so much. Before we go, big announcement on Thursday, January 12, CNN will host a town hall with speaker -- house speaker Paul Ryan. Our own Jake Tapper will sit down with the speaker at George Washington University here in Washington just over a week before President-elect Donald Trump's inauguration. Jake and Ryan will take questions from the audience about the GOP strategy for the first 100 days of Trump's presidency. You can see the one-hour live only on CNN 9:00 p.m. Eastern, that is next Thursday, January 12th.

That's it for THE LEAD. I'm Jim Sciutto and again, for Jake Tapper. I turn you over now to "THE SITUATION ROOM" where it resides, Wolf Blitzer.